The Securities and Exchange Commission has announced fraud charges against three former senior managers of Regions Bank for “intentionally misclassifying loans that should have been recorded as impaired for accounting purposes.”

The Securities and Exchange Commission has announced fraud charges against three former senior managers at Birmingham, AL-based Regions Bank for “intentionally misclassifying loans that should have been recorded as impaired for accounting purposes.” 

The bank’s publicly-traded holding company consequently overstated its income and earnings per share in its financial reporting, according to a statement from the US authority.

The SEC also said it has entered into a deferred prosecution agreement with Regions Financial Corp, which “substantially cooperated with the agency’s investigation and undertook extensive remedial actions.”

The firm will pay a total of $51 million to resolve parallel actions by the SEC, Federal Reserve Board, and Alabama Department of Banking.

According to the SEC’s orders - instituting administrative proceedings against the three former managers - Thomas A Neely Jr was the “principal architect” of the scheme while serving as head of Regions Bank’s risk analytics group in 2009. 

With the bank’s head of special assets, Jeffrey C Kuehr , and chief credit officer, Michael J Willoughby, Neely took “intentional steps to circumvent internal accounting controls and improperly classify $168 million in commercial loans as performing so Regions could avoid recording a higher allowance for loan and lease losses,” the SEC said.

Kuehr and Willoughby agreed to settle the SEC’s charges by paying penalties of $70,000 and consenting to bars from serving as officers or directors of public companies. The SEC’s Division of Enforcement will continue to litigate its case against Neely.

"Since the financial crisis, Regions has returned to sustainable profitability, significantly reduced credit losses, and strengthened its executive management team, including naming a new CEO and chairman as well as a new chief financial officer, general counsel, deputy general counsel, chief risk officer, and chief credit officer," Regions said in a statement.

"In addition, Regions has significantly strengthened its risk management team and processes, including creating an Ethics Council, restructuring credit and problem asset management, enhancing loan portfolio analytics capabilities, and strengthening governance and board oversight."